HALF YEAR RESULTS 27 FEBRUARY 2017

Transcription

1 HALF YEAR RESULTS 27 FEBRUARY 2017

2 Important Notice and Disclaimer DISCLAIMER AS TO FORWARD LOOKING STATEMENTS This presentation contains forward looking statements, including statements of current intention, statements of opinion and predictions as to possible future events. These forward looking statements are based on, among other things, Macmahon Holdings Limited's ACN (Macmahon) assumptions, expectations, estimates, objectives, plans and intentions. Forward looking statements are subject to inherent risks and uncertainties. Although Macmahon believes that the expectations reflected in any forward looking statement included in this presentation are reasonable, no assurance can be given that such expectations will prove to be correct. Actual events, results or outcomes may differ materially from the events, results or outcomes expressed or implied in any forward looking statement. Except as required by applicable law or the ASX Listing Rules, Macmahon does not undertake to update or revise these forward looking statements, nor any other statements whether written or oral, that may be made from time to time by or on behalf of Macmahon, whether as a result of new information, future events or otherwise. None of Macmahon (nor any of its officers and employees), or any other person named in this presentation, or any person involved in the preparation of this presentation makes any representation or warranty (express or implied) as to the accuracy or likelihood or fulfilment of any forward looking statement, or any events or results expressed or implied in any forward looking statement, except to the extent required by law. You are cautioned not to place undue reliance on any forward looking statement. The forward looking statements in this presentation reflect views held only as at the date of this presentation. The directors of Macmahon consider that they have used reasonable care in preparing forward looking financial information (Guidance) in this presentation. However, the Guidance is not fact, rather it is predictive in character and there are margins of uncertainty surrounding any assumptions about future conditions and anticipated performance. The Guidance may differ materially from results ultimately achieved. You are cautioned not to place undue reliance on the Guidance. Forward looking information is by its very nature subject to uncertainties and can be affected by unexpected events, many of which are outside the control of Macmahon's directors. Any variation to the assumptions on which the Guidance has been prepared could be materially positive or negative to actual financial performance. Therefore Macmahon's directors cannot guarantee the achievement of the Guidance. The Guidance should not be regarded as a representation or warranty with respect to its accuracy or the accuracy of the best estimate assumptions or that Macmahon will achieve, or is likely to achieve, the particular results. You are encouraged to read Macmahon's Target's Statement dated 27 February 2017 and, in particular, the material best estimate assumptions and sensitivities in section 6.4(f) of the Target's Statement (which responds to CIMIC's unsolicited off-market takeover offer to acquire the shares in Macmahon which it does not own). You should also read the risk factors set out in section 8.2 of the Target s Statement. The Guidance also takes no account of the adviser and other third party costs incurred to date and to be incurred by Macmahon in responding to CIMIC s offer, on the basis that they are non-recurring and therefore not reflective of the underlying performance of Macmahon. The expected reported statutory results for Macmahon in FY2017 will include costs associated with responding to CIMIC s offer and are estimated to be approximately $2.5 million to $3.0 million. This presentation does not take into account the individual investment objectives, financial or tax situation or particular needs of any person. It does not contain financial advice. You should consider seeking independent legal, financial and taxation advice in relation to the contents of this presentation. Non- IFRS Financial Information This presentation uses non-ifrs financial information including EBITDA and EBIT which are used to measure both group and operational performance. Non IFRS measures have not been subject to audit or review. References to Macmahon, the Company, the Group or the Macmahon Group may be references to Macmahon Holdings Limited or its subsidiaries. 1

3 Executive Summary 1H FY2017 Highlights Revenue: $168.3 million 1 EBITDA: $10.4 million 2 EBIT: ($4.5) million 2 Net loss after tax: ($5.0) million Cash generated from operating activities: $12.5 million 3 Net cash: $49.8 million Order book: $1,295 million 4 Tender pipeline: $6.4 billion 4 Key Observations Mining services industry showing strong signs of improvement Tropicana (our largest contract) continues to perform profitably Results impacted by losses at Telfer, with anticipated improvement in operating and financial performance Order book is underpinned by Tropicana, with possible life of mine extension pending Long Island Study approval FY2018 growth is predicated on strong tender pipeline Note: Financial metrics shown relate to continuing operations. All references in this presentation to $ are Australian dollars (unless otherwise stated). 1. Revenue excludes Martabe joint venture and other income. 2. Non-IFRS financial information (EBITDA earnings before interest, tax, depreciation and amortisation, EBIT earnings before interest and tax). 3. Cash generated from operating activities is before net interest paid and income taxes paid. 4. As at 31 December

4 Investment Highlights FULL SERVICE MINING CONTRACTOR Diversified mining contractor offering open-pit and underground mining services Strong existing relationships with major mining companies STRONG TENDER PIPELINE LEVERAGED TO RESOURCES RECOVERY STRONG BALANCE SHEET 18 tender opportunities representing $6.4 billion in aggregate contract value 44% of tender pipeline is at exclusive, preferred or shortlisted stage Global mining expansion capex is forecast to grow by ~14% pa over Increased mining services sector activity driven by commodity price recovery and improved outlook Strong net cash of $49.8 million, provides flexibility to pursue growth options Net Tangible Assets ( NTA ) per share of $0.16 per share FOCUSED STRATEGY ATTRACTIVE FINANCIAL OUTLOOK Historical focus on cost reductions, productivity and non-core assets sales Current focus on growing tender pipeline, new opportunities and Telfer turnaround FY2018 EBIT guidance of $30 35 million 2 Improvement in financial performance driven by Telfer turnaround, Tropicana expansion and assumed new contract wins 1. Wood Mackenzie, Global mining capex spend: winners and losers dated August For the bases, assumptions and sensitivities relevant to the Guidance see section 6.4 of Macmahon s Target's Statement (released to the ASX on 27 February 2017) and for certain relevant risk factors see section 8.2 of that Target's Statement. 3

5 Update on CIMIC Offer CIMIC S OFFER BOARD RECOMMENDATION INDEPENDENT EXPERT NEXT STEPS On 24 January 2017, CIMIC made an unsolicited off-market takeover offer to acquire the shares in Macmahon which it does not own for $0.145 cash per share ( Offer ) Offer is final and therefore cannot be increased, in the absence of a competing proposal Offer is unconditional, apart from limited prescribed occurrences CIMIC s ownership interest is 22.99% 1 Majority of trading in Macmahon shares since 24 January 2017 has been above CIMIC s Offer price 2 CIMIC s offer is to remain open until 9 March 2017, unless extended further The Directors unanimously recommend that shareholders REJECT CIMIC s Offer and TAKE NO ACTION 3 : The Offer is inadequate and the independent expert has concluded that it is neither fair nor reasonable Timing of the Offer is opportunistic and doesn t reflect the improved outlook for the mining services sector Macmahon has significantly improved prospects from its existing contracts and a strong tender pipeline CIMIC is not offering enough for the benefits it may receive Accepting the Offer may deprive you of the ability to consider an alternative proposal, should one emerge The Independent Expert (Lonergan Edwards & Associates Limited) has concluded that 4 : CIMIC s Offer is NEITHER FAIR, NOR REASONABLE Assessed the value of Macmahon on a 100% controlling basis of between $0.177 $0.203 per share Macmahon shareholders should read the Target s Statement (released on ASX today) and seek independent financial advice ahead of making any investment decision Shareholder information line: (within Australia) or (outside Australia) 1. Based upon CIMIC's Second Supplementary Bidder's Statement. 2. IRESS, based upon market trading post CIMIC offer on 24 January 2017 and until 24 February Refer to the Target s Statement released on the ASX on 27 February 2017 for full reasons for the Directors recommendation. 4. See Annexure B of the Target s Statement for the Independent Expert s Report. 4

6 1. OPERATIONAL UPDATE

7 Map of Operations Macmahon s operations are spread across multiple significant projects in Australia and Southeast Asia, with a growing focus on Indonesia 6

8 Operational Update SAFETY EXCELLENCE Our first priority is to strive for safety excellence Achieved an LTIFR of 0.5 in 1H FY2017, a 55% reduction compared to 30 June INDUSTRY OUTLOOK Improved outlook for global mining expansion capex and activity in the mining services sector Outlook driven by recent recovery in commodity prices Tender pipeline has increased to $6.4 billion and includes 18 separate opportunities NEW OPPORTUNITIES TROPICANA 44% of tender pipeline is at exclusive, preferred or shortlisted status 2 Announced a MOU to become the preferred mining contractor for PT AMNT at Batu Hijau copper/gold mine on Sumbawa Island, Indonesia Macmahon s revenue from the Tropicana project is expected to increase by ~25% in CY Macmahon s order book is underpinned by Tropicana, with possible life of mine extension pending Long Island Study approval TELFER Expected to generate monthly profits during the latter part of CY2017 NIGERIA Cessation of mining contract at Calabar and no ongoing costs in the region month lost time injuries per million man hours worked. 2. Percentage refers to value of total pipeline 3. Based on a comparison of actual revenue for the year ended 31 December 2016 and currently anticipated revenue based on internal projections for the year ending 31 December 2017, as announced by Macmahon to the ASX on 25 January

9 Frequency Rate (per million hours worked) Safety Excellence 1H FY2017 Performance Key Observations LTIFR decreased to 0.5; a 55% reduction compared to 30 June 2016 (1.1) 5.4 Most projects remained LTI free Key safety initiatives during the period: 4.1 Leadership & Safety training: coaching sessions for individuals in supervisory positions Change in Employee Assistance Provider: utilising online and mobile connectivity to provide better coverage for workers Streamlined Systems: simplified access to key policies, procedures and HSEQ documentation Dec - 14 Jun - 15 Dec - 15 Jun - 16 Dec Month month LTIFR Lost Time Injury Frequency Rate (LTIFR) 12 Month month TRIFR Total Recordable Injury Frequency Rate (TRIFR) Deployment of Macmahon Safety Solution program across all areas of the business, including international operations month lost time injuries per million man hours worked. 8

10 US$, rebased to 100 US$ billion, forecast in real 2016 dollars Industry Outlook Historical Commodity Prices 1 Commodity prices have rebounded strongly in 2016, after a number of challenging years Jan 2016 Global Expansion Mining Capex 2 Resources sector is expected to grow strongly over benefitting mining contractors 140 CAGR : (22%) CAGR : 14% Forecast (13%) (29%) (37%) (49%) (54%) Copper - LME Cash Official Nickel - LME Cash Official Gold - NYMEX Near Term Coal - Australian Thermal FOB Newcastle/Port Kembla Iron Ore - 62% Fe CFR China (TSI) Near Term Factset, market data as at 20 February Chart shows US$ prices which have been rebased to 100 on 1 January Wood Mackenzie, Global mining capex spend: winners and losers dated August

11 New Opportunities Tender Pipeline Macmahon has a tender pipeline of 18 opportunities which represent approximately $6.4 billion in aggregate contract value, 44% of these opportunities are at exclusive, preferred or shortlisted status 1 1. Percentage refers to value of total pipeline Note: 18 tender pipeline opportunities displayed with the Batu Hijau opportunity excluded from the chart as the value of this opportunity is yet to be determined (refer to Macmahon s ASX announcement dated 13 February 2017 Macmahon signs MOU to become preferred contractor for Batu Hijau mine for more information). This includes opportunities at Tropicana, where Macmahon is the life of mine contractor. Tender pipeline represents the aggregate value of the contracts which Macmahon is currently pursuing with clients. There is no guarantee that these opportunities will be converted into revenue. 10

12 Koz Au (100% ownership) Tropicana Expansion Potential Tropicana Directional Production 1 Independence Group Presentation (15-Dec-16) Operational Update Tropicana is our largest alliance contract and has been profitable since inception Life of mine contract for AngloGold Ashanti and Independence Group s open-pit gold mine in Western Australia Operational excellence - first quartile cost position Macmahon s revenue from the Tropicana project is expected to increase by ~25% in CY Results of the Long Island study are due by end of June 2017 along with further studies on other deposits, which, if approved, could potentially extend the life of mine at Tropicana through to CY2016 CY2017 CY2018 CY2019 Tropicana Reserves recently increased by +58% to 3.8Moz gold 1. Source: Independence Group ASX announcement Tropicana Value Enhancement Update dated 15 December Chart shows directional production for Tropicana per Independence Group s public disclosure. This is indicative only and subject to change with the finalisation of the Long Island Study during 2017 (which may or may not be approved). 2. Based on a comparison of actual revenue for the year ended 31 December 2016 and currently anticipated revenue based on internal projections for the year ending 31 December 2017, as announced by Macmahon to the ASX on 25 January

13 $ million Telfer Turnaround Strategy Telfer EBIT Guidance 30 Operational Update Telfer is our second largest contract, an open-pit and bulk earthworks mining contract for Newcrest s Telfer gold-copper mine in Western Australia (10) (20) Expected to achieve monthly profits during the latter part of CY2017 Telfer has been incurring significant losses since commencement, driven by: Greater than expected costs in start-up activities Difficult operating conditions in initial mining areas Additional maintenance rectification costs for client supplied equipment, which also impacted mining productivity Macmahon expects to achieve monthly profits at Telfer during the latter part of CY2017 driven by: Majority of primary loading equipment rebuilds have been completed Mining within the most difficult areas is either complete or nearing completion (30) 1H FY2017 2H FY2017 FY2018 Mining has commenced in new and more efficient areas: shorter trucking hauls, higher excavator productivity rates and easier geological and hydrological conditions Macmahon is entitled to increase its rates from February 2017 due to a contractual rise and fall mechanism Note: Macmahon has provided earnings guidance on the basis of a number of assumptions and forecasts, which may subsequently prove to be incorrect. Earnings guidance is not a guarantee of future performance and involves known and unknown risks, Macmahon's actual results may differ materially from its earnings guidance and the assumptions on which that earnings guidance is based. Accordingly, you should not place undue reliance on Macmahon's earnings guidance. Refer to Section 6.4 and Section 8.2 of Macmahon s Target Statement for further information. 12

14 2. FINANCIAL RESULTS

15 Income Statement $m, for the six months ended 31 December Dec-16 Dec-15 Revenue EBITDA EBIT 2 (4.5) 16.6 Finance costs (0.1) (1.3) Tax expense (0.4) (1.0) Significant item - (2.1) Net (loss) / profit after tax from continuing operations (5.0) 12.3 Net loss from discontinued operations (net of tax) (18.3) (8.9) Net (loss) / profit for the period (23.3) 3.3 Note: Financial metrics shown relate to continuing operations. Rounding differences may exist. 1. Revenue excludes Martabe joint venture and other income. 2. Non-IFRS financial information (EBITDA earnings before interest, tax, depreciation and amortisation, EBIT earnings before interest and tax). 14

16 $m EBIT Summary 1H FY2017 EBIT Key Observations (10) Telfer Macmahon Ex Telfer EBIT 1H FY2017 EBIT of ($4.5) million impacted by $18.7 million loss at Telfer Macmahon anticipates improvements in financial and operational performance at Telfer Tropicana, Macmahon s largest contract, continued to perform profitably in 1H FY2017 See page 12 for further information on management initiatives (20) (30) 1H FY2017 Note: Financial metrics shown relate to continuing operations. 15

17 Cash Flow Statement $m, for the six months ended 31 December Dec-16 Dec-15 Cash generated from operating activities Net interest paid (0.1) (1.0) Income taxes paid (0.7) (2.4) Net cash from operating activities Proceeds from sale of assets Investment in joint venture 1.9 (3.6) Capital expenditure (excluding new finance lease) (16.5) (10.2) Net cash used in investing activities (4.7) (5.2) Net cash used in financing activities (1.9) (171.1) Net increase / (decrease) in cash 5.2 (167.9) Effect of exchange rate changes (2.2) (0.3) Opening cash balance Cash on hand Maintained positive cash flow from operating activities despite challenges at Telfer Capital expenditure represents stay-in-business expenditure on existing contracts (excluding new finance lease) Proceeds from sale of assets relates to surplus equipment Note: Rounding differences may exist. Includes discontinued operations. 16

18 Balance Sheet $m, As at period ended 31-Dec Jun-16 Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Total equity Gearing Net cash Gearing (Net Debt / Net Debt + Equity) (20.9%) (21.4%) Macmahon well positioned to pursue growth opportunities strong net cash balance $51.1 million of unrecognised Australian deferred tax assets 1 Significant asset backing $0.16 NTA per share 1 Note: Rounding differences may exist. 1. As at 31 December

19 3. STRATEGY & OUTLOOK

20 Macmahon s Strategic Roadmap Strategy Developing deeper client relationships and expand international presence Focus on execution of existing projects, whilst reinvigorating the underground business Diversify the business and seek capital light growth opportunities FY2016 Reset FY2017 Turnaround FY2018 Delivery New management team (Mick Finnegan CEO, José Martins CFO) Risk based selective approach to tendering, with focus on early client engagement Legacy issues largely addressed (i.e. cessation of operations in Nigeria) Anticipated improvements in financial and operational performance at Telfer Management focus on cost reduction, productivity and project delivery Order book is underpinned by Tropicana extension pending Long Island Study approval Enhance tender pipeline through relationship building with key clients Expectation of new contract wins from portfolio of 18 different opportunities Telfer expected to achieve monthly profits during the latter part of CY

21 $m $m FY2017 Guidance Revenue Key Movements EBIT Key Movements (5) (15) (25) 1H FY2017 Tropicana Telfer Other Revenue 2H FY2017 Contracted 2H FY2017 Short-term Uncontracted nil 2H FY2017 New Work Telfer Macmahon Ex Telfer EBIT FY2017 Key Assumptions FY2017 revenue guidance: $ million In line with prior guidance provided in Aug-16 >90% of 2H FY2017 revenue is already contracted Revenue growth in 2H FY2017 is primarily driven by increased mining volumes at Tropicana Short-term uncontracted revenue primarily relates to underground mining services, external maintenance and engineering services 2H FY2017 activity levels assumed to be broadly in line with historical levels FY2017 EBIT guidance: ($3) - 0 million Macmahon (ex Telfer) anticipated to remain profitable in FY2017 1H FY2017 Telfer EBIT loss of $18.7 million is anticipated to reduce to $7.8 million in 2H FY2017 See page 12 for turnaround strategy (35) 1H FY2017 FY2017 Note: Macmahon has provided earnings guidance on the basis of a number of assumptions and forecasts, which may subsequently prove to be incorrect. Earnings guidance is not a guarantee of future performance and involves known and unknown risks, Macmahon's actual results may differ materially from its earnings guidance and the assumptions on which that earnings guidance is based. Accordingly, you should not place undue reliance on Macmahon's earnings guidance. Refer to section 6.4 and section 8.2 of Macmahon s Target Statement for further information. Revenue and EBIT guidance relates to continuing operations only and charts show mid-point of earnings guidance range. 20

22 $m $m FY2018 Guidance Revenue Key Movements (15) (30) (45) FY2018 Contracted FY2017 Tropicana Telfer Other Revenue FY2018 Short-term Uncontracted EBIT Key Movements FY2018 New Work Telfer Macmahon Ex Telfer New Work EBIT FY2018 FY2018 Key Assumptions FY2018 revenue guidance: $ million Growth from existing contracts driven by increased mining volumes at Telfer and Tropicana, as well as increased productivity at Telfer Assumes 3 new contracts are awarded from a tender pipeline of 18 separate opportunities 50% of revenue from those three contracts is included in the forecast given Macmahon is one of two remaining bidders for each contract Assumes continuation of ad-hoc revenue in line with recent historical experience FY2018 EBIT guidance: $30 35 million Performance of Macmahon (ex Telfer) anticipated to be broadly in line with FY2017 Telfer anticipated to provide a modest profit in FY2018, generating monthly profits during the latter part of CY2017 FY2018 EBIT guidance of approximately $25 million, if no new long-term contracts are awarded Note: Macmahon has provided earnings guidance on the basis of a number of assumptions and forecasts, which may subsequently prove to be incorrect. Earnings guidance is not a guarantee of future performance and involves known and unknown risks, Macmahon's actual results may differ materially from its earnings guidance and the assumptions on which that earnings guidance is based. Accordingly, you should not place undue reliance on Macmahon's earnings guidance. Refer to section 6.4 and section 8.2 of Macmahon s Target Statement for further information. Revenue and EBIT guidance relates to continuing operations only and charts show mid-point of earnings guidance range. 21

23 APPENDIX

24 Guidance Summary $m, financial year ending 30 June FY2017 FY2018 Revenue EBITDA EBIT (3.0) % EBIT margin (0.9%) 0.0% 6.4% - 6.9% Capital expenditure Existing contracts Stay in business Expansion New Contracts Total capital expenditure Note: Macmahon has provided earnings guidance on the basis of a number of assumptions and forecasts, which may subsequently prove to be incorrect. Earnings guidance is not a guarantee of future performance and involves known and unknown risks, Macmahon's actual results may differ materially from its earnings guidance and the assumptions on which that earnings guidance is based. Accordingly, you should not place undue reliance on Macmahon's earnings guidance. Refer to section 6.4 and section 8.2 of Macmahon s Target Statement for further information. Revenue and EBIT guidance relates to continuing operations only and charts show mid-point of earnings guidance range. 1. FY2018 earnings guidance includes 100% of anticipated capital expenditure from new contracts, but 50% of anticipated revenue and EBIT from new contracts. 23

25 Tender Pipeline: $6.4 billion Tender Pipeline by Status Pre Tender 30% Exclusive, Preferred or Shortlisted 44% Tender Pipeline by Commodity Uranium 13% Mineral Sands 4% Coal 30% Tender 26% Gold 53% Tender Pipeline by Contract Type Hourly Hire 2% Tender Pipeline by Location West Africa 4% Alliance 29% Queensland 17% Schedule of Rates 69% Other 14% Western Australia 65% Note: tender pipeline shown by aggregate contract value as at 31 December